Medtronic 2012 Annual Report Download - page 50

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income or expense within acquisition-related items in our consolidated statements of earnings. Changes to
the fair value of contingent consideration liability can result from changes in discount rates and periods as
well as changes in the timing and amount of revenue estimates or in the timing or likelihood of achieving
the milestones which trigger payment. Using different valuation assumptions including revenue or cash flow
projections, growth rates, discount rates or probabilities of achieving the milestones could result in different
purchase price allocations, amortization expense, and contingent consideration expense in the current or
future periods.
Goodwill is the excess of the purchase price over the fair value of net assets, including IPR&D, of
acquired businesses. Goodwill is tested for impairment annually or whenever an event occurs or
circumstances change that would indicate that the carrying amount may be impaired. The test for
impairment requires us to make several estimates about fair value, most of which are based on projected
future cash flows. Our estimates associated with the goodwill impairment test are considered critical due to
the amount of goodwill recorded on our consolidated balance sheets and the judgment required in
determining fair value, including projected future cash flows. Goodwill was $9.934 billion and $9.520 billion
as of April 27, 2012 and April 29, 2011, respectively.
Other intangible assets include patents, trademarks, purchased technology, and IPR&D (since April 25,
2009). Intangible assets with a definite life are amortized on a straight-line or accelerated basis, as
appropriate, with estimated useful lives ranging from three to 20 years. We review all intangible assets for
impairment annually or whenever events or circumstances indicate that the carrying amount of an asset
(asset group) may not be recoverable. Refer to Note 1 to the consolidated financial statements in “Item 8.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional
information. Our impairment reviews are based on an estimated future cash flow approach that requires
significant judgment with respect to future revenue and expense growth rates, selection of appropriate
discount rate, asset groupings, and other assumptions and estimates. We use estimates that are consistent with
our business plans and a market participant view of the assets being evaluated. Actual results may differ from
our estimates. Other intangible assets, net of accumulated amortization, were $2.647 billion and $2.725 billion
as of April 27, 2012 and April 29, 2011, respectively.
Discontinued Operations
On November 16, 2011, we entered into a definitive agreement with Bain Capital Partners, LLC (Bain
Capital) for Bain Capital to acquire Physio-Control and related entities, excluding certain assets and
liabilities, for cash in a transaction valued at approximately $405 million excluding potential earn-outs and
any working capital adjustments. The working capital adjustment will be adjusted based on the final closing
balance sheet in accordance with the agreement. On January 30, 2012, we completed the sale of the Physio-
Control business to Bain Capital and recognized a pre-tax gain on sale of $218 million in the fourth quarter
of fiscal year 2012. The recognized gain is below the previously disclosed range of $220 to $235 million due
to the reversal of the portion of our currency translation adjustment related to Physio-Control and an
increase in the net assets sold. Beginning in the third quarter of fiscal year 2012, the assets and liabilities of
this business met the accounting criteria to be classified as held for sale and have been aggregated and
reported on separate lines in the consolidated balance sheets for all periods presented. We also classified the
results of operations of the Physio-Control business, which were previously presented as a component of the
Cardiac and Vascular Group operating segment, as discontinued operations in the consolidated statements
of earnings for all periods presented. For more information regarding discontinued operations, refer to Note
3 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in
this Annual Report on Form 10-K.
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